The court addressed the priority of various liens against debtor's property in order to determine entitlement to proceeds of the property's sale. The court invalidated the majority of mechanic's lien claims on the basis that their claims arose by statute and their lien forms failed to satisfy the requirements of that statute. Furthermore, the statutory time limit for filing mechanic's liens had expired. Therefore, the mechanic's liens were invalidated, and a subsequently filed trust deed was entitled to priority over those claims. The court also found that bank's first trust deed included a subsequent advance of additional funds to debtor because both the note and trust deed contained clear language that the parties intended that result. Finally, the court held that debtor's homestead exemption took priority over all liens and encumbrances on the property, except "security interests," which can only be created voluntarily. The mechanic's lien ruling in this case was, at least arguably, invalidated by the district court's Sorenson opinion at 186.pdf, which found that mechanic's liens needed to be signed and verified, but were not necessarily rendered invalid by failure to sign the verification block on the form's reverse side.
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Title: In re Williamson, 43 B.R. 813 (Bankr.D.Utah) | Date: Jul-11-1984 | Status: PUBLISHED See 186.pdf (Judge Clark) | Case(s): 82C-1703
Title: In re John Clay & Co., Inc., 43 B.R. 797 (Bankr.D.Utah) | Date: Jun-15-1984 | Status: PUBLISHED See 112.pdf (Judge Clark) | Case(s): 83A-1323
On requests for rehearing, the court withdrew its previous decision in this matter [112.pdf] based on its finding that movants had not technically been accorded procedural due process with respect to the issue of applicability of the Packers and Stockyards Act to the claims of creditor sheep producers. The court first considered whether any of the sheep producers' claims were incurred postpetition, based on its conclusion that payment to the sheep producers became due at the time and place of delivery of the sheep. Under this guideline, the court used the delivery date to separate clearly prepetition deliveries from postpetition deliveries, which were entitled to priority as administrative expenses if they were incurred for the actual and necessary costs of preserving the bankruptcy estate. The court then considered deliveries that occurred on the same day the petition was filed, finding that the sheep were "delivered" when they were weighed in the trailer and a weigh ticket was created. The court then divided the "day of" transactions into those that were incurred prior to and after the filing of the petition at 1:56 p.m. MDT. The court next considered which postpetition claims were "actual and necessary costs," concluding that delivery of goods should be given the same priority as provision of services. Therefore, all postpetition sheep deliveries were entitled to administrative priority. Finally, the court ruled that administrative claimants were not entitled to interest on their claims, but that the unsecured, prepetition claimants might be entitled to interest, under state law, up to the date of the petition filing.
Title: In re Curtis, 40 B.R. 795 (Bankr.D.Utah) | Date: Jun-11-1984 | Status: PUBLISHED (Judge Allen) | Case(s): 83A-2417
Creditors moved for relief from stay "for cause," under 11 U.S.C. § 362(d)(1), in order to join debtors as defendants in a pending state court lawsuit. Noting that the "for cause" provision was intended to be narrowly construed, the court held that the movant has the burden to establish a legally sufficient "cause," which then shifts the burden to debtor to demonstrate entitlement to the stay. The court then found that creditors had failed to make a prima facie case of "cause" and that, even if they had, the relevant factors weighed in favor of not vacating the stay. Creditors' motion for relief was denied.
Title: Gillman v. Alpine School Dist. (In re T & D Mgmt. Co.), 40 B.R. 781 (Bankr.D.Utah) | Date: Jun-8-1984 | Status: PUBLISHED (Judge Clark) | Case(s): 83PC-0889
Trustee filed an adversary complaint against school district seeking to recover allegedly preferential transfers by debtors. School district moved to dismiss the complaint, asserting lack of subject matter jurisdiction. The court determined that school district was a subdivision of the State of Utah under the Utah Constitution and state statute and was, therefore, a "governmental unit" within the meaning of 11 U.S.C. § 106(c). Based on an extensive review of legislative history, the court ruled that § 106(c) makes a governmental unit subject to bankruptcy court jurisdiction only with respect to Bankruptcy Code provisions that contain the terms "creditor," "entity," or "governmental unit." The court determined that, as 11 U.S.C. § 548(a)(2) does not contain those terms, it does not provide jurisdiction against a governmental unit unless that unit has waived its sovereign immunity. The motion to dismiss was granted.
Title: In re United Roberts Corp.In re Roberts | Date: Jun-8-1984 | Status: UNPUBLISHED (Judge Clark) | Case(s): 82C-2454, -3098, -3099, and -3100
Individual debtor brothers made several transfers to and from jointly owned corporate debtor, including transfer of each of their respective residences to the corporation, and mortgages and promissory notes from the corporation to themselves. The parties also executed leases that allowed each brother to retain their residence, subject to payment of monthly "rent." In bankruptcy, trustee sought determinations of (1) whether brothers' claim that their rent payments were offset by a debt owed to them; and (2) whether brothers were required to assume or reject their leases. The court denied brothers' claimed offset of patent royalties owed them by the corporation, as they had transferred their interests in those royalties to family partnerships and, therefore, there was no mutuality, as required for offset. Brothers were ordered to either assume or reject their leases by a date certain and, if they chose to assume, pay the entire monthly rent accrued since the filing of the corporation's petition in order to cure.
Title: In re Sweetwater, 40 B.R. 733 (Bankr.D.Utah) | Date: Jun-1-1984 | Status: PUBLISHED (Judge Allen) | Case(s): 83A-2582
Bank was the assignee of lessor's interest in a variety of rapidly depreciating personal property leased to chapter 11 debtor, which were used in connection with debtor's timeshare business. Bank sought to compel debtor to assume or reject the leases, and to provide bank with adequate protection for the period from the petition filing date to the date debtor either assumed or rejected the leases. The court held that Congress intended to provide adequate protection for secured creditors only, and not for lessors, and denied bank's requested relief.
Title: In re Hinckley, 40 B.R. 679 (Bankr.D.Utah) | Date: May-17-1984 | Status: PUBLISHED (Judge Clark) | Case(s): 83C-2026
Creditor with a claim that was secured by a depreciating vehicle moved for adequate protection in debtors' chapter 13 proceeding, after having made a demand for such at the meeting of creditors, which was ignored. The court ruled that creditor was entitled to payments in the amount the vehicle depreciated each month, beginning from when creditor made its demand at the creditors meeting.
Title: In re Abeyta | Date: May-14-1984 | Status: UNPUBLISHED (Judge Clark) | Case(s): 83C-2657
Debtors sought an ex parte order to compel the Utah Office of Recovery Services to show cause why it should not be held in contempt for garnishing debtor's wages and attaching a tax refund, post-filing of their chapter 7 petition, as well as post-discharge. Debtors claimed that the ORS debt was for "child support," but that the debt was not "in connection with a separation agreement, divorce decree, or property settlement agreement," as required by 11 U.S.C. § 523(a)(5), and was therefore dischargeable. The court denied debtors' motion, without ruling on the § 523(a)(5) issue, on the ground that postpetition earnings are not property of a chapter 7 estate. In addition, as the stay was lifted upon discharge, there was no basis to hold ORS in contempt for violating the automatic stay, and debtors had not sought relief based on violation of the post-discharge injunction pursuant to 11 U.S.C. § 524(a)(2). The court noted that the dischargeability provisions of the Bankruptcy Code are not self-executing, and that the proper procedure for determining whether a debt was discharged is the filing of a complaint pursuant to Bankr. Rule 4007. However, in order to do so, debtors would first have to file a motion to reopen their case.
Title: Copper State Thrift & Loan v. United Roberts Corp. (In re United Roberts Corp.) | Date: Apr-11-1984 | Status: UNPUBLISHED (Judge Clark) | Case(s): 83PC-0837
Bank loaned money to corporate debtors, guaranteed by individual debtors, who were owners and principals of the corporations. In connection with the loans, debtors provided bank with promissory notes and trust deeds to real property. Debtors failed to pay the notes when they came due six months later, but the parties entered into a sale and leaseback arrangement, under which, bank would be given a new note in the amount of accrued interest owed on the loans, bank would "buy" equipment from debtors, on which they would make "lease" payments to bank, in repayment of the original notes. This arrangement was based on bank's policy that notes must be paid within one year, whereas lease obligations could be paid over five years. The promissory notes were never marked "paid," and the trust deeds were not reconveyed. After debtors filed chapter 11 petitions, bank moved for relief from stay. In response, debtors argued that the sale and leaseback agreement was a "novation," which meant bank was an unsecured creditor. Bank, however, argued that the leaseback was merely a modification or extension of the original loans. The court ruled that the leaseback agreement was not a novation because bank clearly did not intend to release debtors from the original notes, which is required under state law, and debtors had not presented any evidence regarding their own intent. Therefore, bank's claim remained secured by the trust deeds.
Title: In re Lettuce Entertain You, Inc. | Date: Apr-9-1984 | Status: UNPUBLISHED See 151.pdf (Judge Clark) | Case(s): 83C-3014
Creditor, the lessor of commercial mall space to chapter 11 debtor, filed a prepetition state court action against debtor seeking unpaid rent and recovery of the leased property. Over a period of more than a year, debtor made a number of payments to the clerk of the state court, in order to retain possession of the property during the lawsuit. When debtor filed its petition in bankruptcy, the amount being held by the state court was approximately $33,000, which was significantly less than the amount creditor was entitled to under the lease. Creditor filed a motion for relief from the automatic stay and to set a date by which debtor must assume or reject its lease, and debtor moved for turnover of the funds. Creditor argued that debtor had no interest in the funds, while debtor argued that the funds were estate property and that creditor's claim was unsecured. The court held that debtor's interest in the funds, although disputed, was part of debtor's estate, and that debtor had a right to use the funds for rehabilitation purposes under 11 U.S.C. §1107 and 1108, unless otherwise ordered. The court denied creditor's motion, granted debtor's motion for turnover, and set a date by which debtor must either assume or reject the lease. This order was vacated, with respect to debtor's motion for turnover, by the bankruptcy court's own order in 151.pdf.